Troubled high street greeting cards retailer Clinton Cards has formally entered administration this afternoon.
The fall of the business was prompted by its largest supplier American Greetings purchasing £35 million worth of loans owed by Clintons from the retailer’s lenders Barclays Bank and Royal Bank of Scotland last night.
Once in control of the debt, American Greetings decided to enforce the loan against the retailer and as the business has no other way of paying its debt it has had to enter administration.
Founded in 1968, Clintons is the UK’s largest specialist of greeting cards and related products operating over 750 store and employing more than 8,000 staff members across its two retail brands, Clintons Cards and Birthdays.
Zolfo Cooper has been appointed as the administrator for the business, and today explained that the retailer has made accumulated losses of more than £130 million since 2004 and could no longer fund its turnaround strategy.
Peter Saville, Joint Administrator and Partner at Zolfo Cooper, said: “Our first priority is to stabilise the business and assess its financial position.
“We will continue to trade the business whilst we undertake a full marketing exercise to find buyers for all or parts of the Group so that the best possible outcome can be achieved for stakeholders.
“It is likely that a number of stores will need to be closed in order to make the business financially viable. However, Clinton Cards and Birthdays are very well-known brands on the high street and we believe that there is a strong underlying core business.”
Jones is welcoming expressions of interest from third parties to takeover the business, and many suspect that American Greetings may now try to acquire the retailer in a pre-pack deal.
The decision by American Greetings to force the administration seem to have been prompted by Clintons receiving temporary waivers on its debt obligations in order to try and restructure the business.
A statement from the retailer today read: “The company is not in breach of any financial covenant or repayment obligation under the facilities. However, it had been in receipt of temporary waivers for some technical breaches of default related to management changes and supplier related discussions.”
“The board believed that, if the loan facilities were sold to American Greetings, American Greetings would enter into discussions with the company with regard to its ongoing support for the business and expected it to extend the waiver of the technical breaches of the loan agreement.”
Instead it appears that American Greetings did not have confidence in Clintons’ turnaround strategy and has decided to recover owed funds through the administration process.
Clintons had been embarking on a strategic review, initiated by new CEO Darcy Willson-Rymer and originally due to be published tomorrow, which was expected to recommend store closures and a reshaping of its internal management structure.
Trading at the business during the first 14 weeks of its second half period fell 3.5 per cent year-on-year on a like-for-like basis, following a 1.1 per cent underlying trading decline and a loss of £3.7 million recorded for the first half ending January 29th 2012.